I'd like one example, please. One example, from either micro or macro
where people had to give up their prior beliefs about how the world
works because of some regression analysis, ideally usually instrumental
variables as that is the technique most used to clarify causation.
I will cite a few possible examples, although I won't stick with instrumental variables:
1. The interest-elasticity of investment is lower than people once thought.
2. We have a decent sense of the J Curve and why a devaluation or depreciation doesn't improve the trade balance for some while.
3. Dynamic revenue scoring tells us over what time horizon a tax cut is partially (or fully) self-financing.
4. Most resale price maintenance is not for goods and services involving significant ancillary services.
5. More policing can significantly lower the crime rate (that one does use instrumental variables).
6. The term structure of interest rates is whacky.
I see other examples but in general I agree with Russ's point that empirical work fails to settle a great number of important disputes, most disputes in fact. Many of the examples I would cite turn out to involve an elasticity being lower than we had thought. And many more involve macroeconomics (rather than micro) than you might expect.
What examples can you think of?